Monday, April 23, 2012

Is Your Business Ready for the Economic Recovery?

With all the recent talk that the economy is well on its way to recovering is your business prepared for the new economic world that is evolving? Are your products and/or services still relevant?  Will your consumers be the same?  Will they be willing to pay the same price for your product that they did during boom times?  Can you produce your product in a simpler (and cheaper way)?  Do you need the same staff?  One thing you can be sure of is that business after the recession will not look the same as it did before.

Most businesses spent  the recession whining and complaining…few business owners prepared to start off running when the economy improved. Now that hopefully there is light at the end of the tunnel, it is the ideal time to tune up your operations. Don’t waste this opportunity. If you want to be ready for the recovery, the time is now to simplify, streamline and optimize your business in preparation for the future.

Step 1: Review and Simplify

§  Industry Review:  Over the last few years your industry might have changed.  Get up to date on the new innovations and make sure that your product (or service) is up to date and competitive.

§  Business Plan Update:  Review and update you business plan so that it reflect the new business environment and changes in your industry.  It is important to update your financials so that they reflect losses that you might have incurred during the recession, updated costs and new pricing.

§  Staff Review:  So you kept your staff during the recession and they stayed with you through thick and thin, but can you sustain your business in the new economy with the same number (and kind of staff).  Do you need a new skill set of people?  Can you produce your product or service with fewer staff?   Who on your staff produces and is part of the team?  Who is innovative and can adjust to new ideas and methods.  It is best to make the hard decisions now and get a head start to profitability than to wait until it is too late.

§  Reduce Clutter:  Over the years, every business collects clutter: unused materials and machines that muck up daily operations. Do a thorough spring-cleaning. Go through every nook and cranny in your office or workspace.  Throw out anything that is out of date or unused. Organize what’s left so anyone can find it when  they need it. Label the location of all materials and organize files making them easy to find.

Step 2: Streamline

§  Eliminate Unnecessary Movement:
In any business, walking is waste. Unnecessary movement of people, machines or materials is wasteful and slow. Reorganize the flow of work to eliminate unnecessary travel.

§  Eliminate Unnecessary Delays: Remove the delays between steps in the workflow. In most businesses, the product or service spends 57 minutes out of every hour waiting for the next employee to do something with it. When you look at the total time from order to delivery, employees are only working on the product or service for three minutes out of every hour (the 3-57 rule). When businesses eliminate the delays between steps, they can reduce turnaround times by 50% or more, double productivity and increase profits by 20% or more. Companies that eliminate unnecessary delays also grow three times faster than their competitors.

§  Eliminate Unnecessary Delays:  The mistake most managers’ make is looking at their employees and thinking they are busy.  And they might be but are they working towards producing and delivering the product? Eliminating unnecessary delays makes the company faster and more efficient, delighting customers. More importantly, they will tell their friends. Nothing beats word-of-mouth to grow a business.

§  Eliminate Unnecessary Inventory: Excess inventory cuts into your profitability. Raw materials and finished but unsold goods take up space, time and money. In most businesses, some level of inventory is necessary, but companies often stockpile materials they rarely need. Get a handle on how much inventory you need to function efficiently and get rid of what you don’t need.

§  Shift to One-Piece Flow:
Most of us grew up learning about mass production and the economies of scale. While useful at the time, the long recession has taught us about economies of speed. If a customer only wants one of your products, it doesn’t matter if you can produce 10,000 quickly. They still only want one and you end up with 9,999 in inventory (remember excess inventory is bad). Figure out how to redesign and reconfigure machines and processes to produce one item or one thousand quickly and easily.  Simplify your operations so that you can flow from producing small to large amounts easily.  This simplifies production scheduling and reduces delivery time.

Step 3: Optimize

§  Count and Categorize Mistakes and Errors: 
When businesses take the time to count and categorize their errors, they quickly discover where most of the errors occur. The employees who work in that area can often figure out a way to mistake proof the process to eliminate most of the errors.  It is helpful to frequently review methods and goals to see what is working right (and wrong) and what goals you are achieving.

§  Mistake Proof the Process: 
Mistake proofing makes it impossible for an employee to make an error. Examples of mistake proofing surround us. Modern cars won’t start unless the transmission is in park, and the driver has a foot on the brake. Electrical plugs have a fat and slender prong so that people can’t plug them in incorrectly. A spell checker automatically checked my spelling as I wrote this article.

While the economic downturn has been painful, it has also given every business an unparalleled opportunity to simply, streamline and optimize in preparation for the recovery. Could you use this time to become faster, better and cheaper than the competition? When the economy recovers, will you be ready?  Need help in preparing call BizBuilding today….201 914-2737!

No comments:

Post a Comment